Pinning Academia's Budget to Sector's Success
Commenting on demand from the academic sector, Witonsky remarked, “It seems that tough times are ahead for this end-user segment.” He said some of those vendors who are not having as strong a Q3 and who may not fare better in Q4 are heavily tied to academic biomedical research. “The market had a substantial rebound in 2010, and the first half of 2011 looked fairly robust and healthy. Now we’ve been seeing a lot of deterioration in the past couple of months.
“The combination of a reduced 2011 NIH budget, the potential 1% reduction to NCI and the NHGRI for 2012, the recent 20% reduction to select genome centers for 2012, the roll-off of stimulus, the one-year no-penalty extension of error grants, and the uncertainty regarding future budgets were in combination a major impact on our incoming order rate,” Illumina CEO Jay Flatley told analysts at an October 25 conference call.
“What cannot be determined at this point is the relative contribution of these factors or how the 2012 or 2013 NIH budgets will ultimately resolve.” He did add, though, “Overall, we continue to believe that funding allocations globally are increasingly favoring genetic analysis tools and in particular, next-generation sequencing.”
In fiscal 2011, NIH was approved for $30.7 billion, 1% below its FY 2010 budget. NIH’s funding in 2010 was boosted by the American Recovery and Reinvestment Act. NIH numbers for FY 2012 won’t be known until the House of Representatives and Senate agree to a spending plan for the Health and Human Services department.
President Obama has proposed that for FY 2012 NIH’s budget should get a 3% boost to reach $31.7 billion. The House Appropriations committee also proposed $31.7 billion. This budget, however, is tied to awarding at least 9,150 new and competing grants and maintaining a 90–10% split between funding for its extramural and intramural research programs. These stipulations have been opposed by NIH’s Capitol Hill backers. The Senate would slice NIH’s budget to $30.5 billion.
“For the most part, vendors are planning for very low growth or perhaps even no growth in 2012 or maybe as far out as 2013,” Witonsky said. And with the deficit supercommittee under pressure to chop at least $1.5 trillion in spending over 10 years, NIH’s ability to grow beyond current levels is uncertain at best. Flat or reduced, NIH spending from FY 2013 onward will force tool and service providers to look even more toward the industry, especially CROs and firms overseas, for more sustainable long-term growth.